Mumbai: The National Company Law Tribunal (NCLT) has dismissed an application filed by Infrastructure Leasing & Financial Services (ILFS)Limited seeking to unwind a series of complex financial transactions with SREI Infrastructure Finance Limited. SREI Infrastructure Finance Limited, is a Kolkata based an Indian non-banking financial company (NBFC) specializing in infrastructure project finance, advisory, and equipment finance.
Restructuring Cannot Be Imposed Without Consent of All Parties
In a detailed order the tribunal refused to “collapse” six transactions worth about Rs 1,060 crore, holding that such restructuring cannot be imposed without the consent of all parties involved.
The tribunal has applied the doctrine of election rests which maintained that a person cannot approbate and reprobate,” A party cannot simultaneously or successively assert rights that are inconsistent with each other, and having acted upon one set of rights to its benefit, cannot thereafter be permitted to resile from that position and assert a wholly contradictory stance.“
IL&FS Had Treated Transactions as Valid for Years
The tribunal also found that IL&FS had, for years, treated these transactions, which now they wanted to ‘collapse’, then as valid and enforceable—filing insolvency proceedings and claims on that basis.
It ruled that IL&FS cannot now take a contradictory stand merely for better recoveries, invoking the doctrine of election.
IL&FS Sought to Recharacterise Loan Arrangements as Circuitous
IL&FS had approached the tribunal seeking to recharacterise certain loan arrangements involving its subsidiary IFIN and SREI group entities as “circuitous” transactions designed to bypass regulatory limits on intra-group lending. It argued that SREI acted merely as a conduit and sought to be declared the direct creditor of several IL&FS group companies.
However, the tribunal held that such relief would effectively amount to rewriting or novating binding commercial contracts—something impermissible without mutual agreement.
Mutual Consent Is Mandatory Precondition, Says NCLAT Ruling
Relying on the earlier ruling of the National Company Law Appellate Tribunal (NCLAT), the bench emphasized that mutual consent is a mandatory precondition for collapsing such transactions.
“The execution of a mutual agreement… is a mandatory precondition,” the tribunal noted, adding that SREI had consistently opposed any such restructuring.
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